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ABN Amro flags buoyant Asian demand for cocoa, coffee, sugar

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Asia provides a “solid base” for sugar prices thanks to demand growth – which remains elusive in the West – ABN Amro said, flagging too the boost to the region for cocoa and coffee consumption prospects.

 

For sugar, “future demand growth lies in Asia,” the bank said, noting that per capita consumption there remains well short of the levels seen in Europe, where it averages the equivalent of about 28 sugar lumps per day.

 

In China, while per capita consumption growth had grown by some 10% this century up to 2018, it remained at a relatively low 8 lumps per day, with Indonesian demand at 16 lumps per day even after expansion of 28% over the same period.

 

For India, the top sugar-consuming country, on a per capita basis demand came in at 13 lumps per day, less than half European levels, despite growth of 14% this century up to last year.

 

‘Bullish sentiment persists’

“The strong demand growth in Asia provides a solid base for price” in sugar, ABN Amro said, contrasting the region with Europe, where since 2010 consumption has “remained virtually stable”, and actually fell “slightly” last year.

 

Demand has also come under pressure in Brazil, the top sugar producing nation, where consumption has fallen from 41 sugar lumps per day in 2010 to an average of 35.

 

The comments follow a revision last week by the bank to its forecasts for New York raw sugar futures, with forecast for average 2020 prices trimmed by 0.30 cents a pound to 12.83 cents a pound, but a level roughly in line with that futures forecast.

 

“Bullish sentiment in sugar persists as the market will swing into [production] deficit in 2019-20,” the bank said, adding that “this will underpin prices”, although acknowledging the threat to values of a release by India onto the world market of some of its huge stocks of the sweetener.

 

‘Strong growth market’

ABN on Tuesday also flagged that Asia was a “strong growth market” for cocoa too, noting that the region is “gaining ground” on Europe in consumption of the bean.

 

“The growth of per capita cocoa consumption is high, on average,” in Asia, with expansion of 11% a year in China over the past decade, 16% in Pakistan and 9% in India.

 

“In addition, the number of grindings and thus the demand for cocoa have increased explosively in recent years,” a trend that the bank said it expects “to continue”.

 

The bank last week held its forecast for New York cocoa futures mid-way through 2020 at $2,495 per tonne on a second contract basis, behind the $2,649 per tonne September 2020 futures are currently trading at, although forecasts for later next year were more upbeat.

 

“Demand in Asia will increase. This means prices will edge slightly higher going forward.”

 

‘Flourishing coffee culture’

For coffee, the bank last week nudged higher its forecast for New York arabica prices in mid-2020 by 6 cents per pound to 108 cents per pound on a second-in contract basis.

 

This remains comfortably behind the 115.95 cents per pound investors were on Tuesday pricing into the September 2020 lot.

 

“Coffee supply will remain high going forward, which will keep prices soft,” the bank said at the time.

 

Nonetheless, on Tuesday it underlined the support to demand from a “flourishing coffee culture in Asian countries.

 

‘Demand will remain relatively high’

“In Asia, the growth in coffee consumption per capita over the last 15 years has been just under 240%, on average,” equivalent to about 16% per year.

 

But with per capita demand there still low relative to the 5.3m kilogrammes per year recorded in Europe, or 6.4 kilogrammes in Brazil, there remains plenty of scope for further expansion.

 

Consumption in Indonesia, Thailand and, especially, China remains below 1 kilogramme per head per year, with that in Malaysia only marginally above that level.

 

Thanks to Asia’s emerging “coffee culture… growth of global demand will remain relatively high in the coming years”.

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